Good Neighbor Next Door: who qualifies and how it works

Good Neighbor Next Door sells certain homes at half their list price to full-time police officers, pre-kindergarten to 12th grade teachers, firefighters and emergency medical technicians. The homes belong to HUD, the U.S. Department of Housing and Urban Development, which took them over, usually after a foreclosure. In return, you must live in the home you buy for 36 months.

Who qualifies for Good Neighbor Next Door?

You qualify if you work full time as a law enforcement officer, teacher, firefighter or emergency medical technician. Your job must serve the area where the home is.

You must have the job when you bid and on the day of closing, when you sign the final papers and the home becomes yours. You also sign a statement that you plan to stay in the job for at least a year after closing.

Two more rules apply. Neither you nor your spouse can have owned a home or other residential property in the year before you bid. And neither of you can have bought a home through this program, or the older Officer Next Door and Teacher Next Door programs, before. The rule sets no income limit, the most a household can earn and still buy, but a lender still has to approve your mortgage.

How much do you save, and what do you pay?

You pay half the list price. HUD takes the other half off and turns that discount into a second loan on the home, which it calls a "silent second." You make no payments on it and pay no interest. It shrinks by one thirty-sixth at the end of each month you live there, so after 36 months you owe nothing.

Say HUD lists a home at $120,000, and you use a mortgage insured by the Federal Housing Administration (FHA), the part of HUD that insures home loans.

So you borrow about $59,900 from your lender, and you owe HUD $60,000 on the second loan, which shrinks to nothing over 36 months if you keep living there.

The earnest money is a deposit that shows HUD you are serious. The rule sets it at 1% of the list price, at least $500 and at most $2,000. You get it back if HUD turns down your bid. If you win, it counts toward your costs at closing, but you lose it if you then don't close.

HUD doesn't pay your closing costs or your broker's fee. The Home Store's help page says an FHA-insured mortgage can let you add your closing costs to the loan. It also says the 50% discount applies only during the seven days a home is listed for this program. After that, the home is offered to other buyers, and you can no longer get the discount on it.

What is the 36-month rule?

You must own the home and live in it as your only home for 36 months. When the 36 months start depends on how much repair work HUD says the home needs:

You must be living in the home by the day your 36 months start.

Each year, around the day you bought the home, HUD mails you a form to sign and return, saying you still live there. If you don't send it back, HUD sends an investigator to visit the home. HUD warns that lying on the form is a felony.

If you sell or move out early, you owe HUD what is left on the second loan. For example, after 24 months in the $60,000 example above, 12 of the 36 months are left, so you owe $20,000.

If a hardship forces you to leave for a while, ask HUD in writing at least 30 days ahead; HUD decides whether to allow it. If you are called to active military duty, you don't have to live there while you serve, but you must tell HUD by following its military duty instructions. If you don't, HUD may refer you for investigation. HUD's handbook, issued August 12, 2026, says your time on active duty counts toward the 36 months.

You may refinance, meaning you replace your mortgage with a new loan. But the new loan plus what is left on HUD's second loan can't be more than 95% of the home's appraised value, what a professional appraiser says it is worth. HUD must also agree to let the new loan be paid off first if the home is sold.

How do you find a home and bid?

You find homes on the HUD Home Store, HUD's website for the homes it sells. Open it, pick your state and choose the Good Neighbor Next Door tab, which shows only the homes listed for the program. They are one-family homes in areas HUD has picked for rebuilding, called revitalization areas, and the tab shows only homes that qualify. HUD says the list is short and changes every week, so check often.

You can't bid on your own. A real estate broker registered to sell HUD homes places the bid for you. If more than one person bids on a home during its seven days, HUD picks the winner in a lottery, a random drawing, and chooses two backup bids in order. If both you and your spouse qualify, you can each bid, but HUD accepts only one of you.

HUD sells its homes as is: it makes no repairs before you buy. So get a home inspection before you bid, and count any repairs in your budget.

What are the steps?

1. Check your job and your past homes. Make sure your job fits the table above and that you and your spouse haven't owned a home in the past year.
2. Talk to an FHA-approved lender. Ask about your credit, income and debts, and get a letter saying how much you can borrow. Check first that you meet the FHA loan rules.
3. Find a real estate broker registered with HUD to sell its homes. Ask your lender for names, or ask a broker whether they are registered. Set aside $500 to $2,000 for the earnest money.
4. Watch the Home Store's Good Neighbor Next Door tab for your state every week.
5. Bid through your broker within the home's seven days.
6. Close with your lender if you win, and move in by the day your 36 months start.

What if you don't qualify?

Some cities and nonprofits sell homes below market price to buyers under an income limit, often by lottery. Apply for those affordable homes for sale, and look up your state's down payment help.

To see what you can apply for, browse the homes for sale on our listings page and the open housing lotteries. Our qualify check shows which listings fit your household's size and income.